The gaming sector is set to benefit from the Johor-Singapore Special Economic Zone (JS-SEZ). With the Rapid Transit System (RTS) Link expected to increase the number of Malaysian day commuters to Singapore, integrated resort (IR) operators in Singapore could see a boost in visitors and gamblers.
Based on ground checks in Singapore’s IRs, analyst Yin Shao Yang of Maybank Investment Bank found that Malaysians account for 20% to 30% of the city-state’s total gross gaming revenue (GGR). In his April 16 report, Yin noted that in 2023, the blended VIP and mass market GGR mix in Singapore was 36:64.
“We understand most Malaysian VIPs are high-net-worth individuals with business or investment interests in Singapore. We also understand that most Malaysian mass-market gamblers are part of the 250,000 to 300,000 Malaysians who live in Johor but cross the Causeway daily to work in Singapore,” Yin adds.
Yin clarifies that he does not expect more Malaysian VIPs to gamble at the IRs if the SEZ is set up because infrastructure improvements traditionally only favour visits by mass-market gamblers. That said, the analyst does expect the SEZ to positively impact on the mass-market gambler’s visitation, especially if it will decongest the Causeway. The mass market is crucial as it yields much higher ebitda margins of 40%–50%, he highlights.
Although average salary per employee at both of the Singapore IRs has risen compared to pre-pandemic years, lower border friction may ease labour pressure, Yin adds.
The main potential beneficiary of the higher Malaysian mass-market gamblers and workers is Genting Singapore G13 , which operates Resorts World Sentosa (RWS).
See also: Forest City’s revival plans reel in crypto bros
The stock has exhibited outperformance, with analysts at Maybank, Citi Research, DBS Group Research, UOB KayHian (UOBKH) and OCBC Investment Research keeping “buy” on Genting Singapore following its 1QFY2024 ended March earnings beat. The company reported an adjusted ebitda of $369.5 million, up 92.7% y-o-y, surpassing consensus expectations.
UOBKH analysts expect Genting Singapore to have a fruitful 2024 based on positive catalysts. These include an accelerated recovery of foreign visitations and flight frequencies, mega entertainment events in the pipeline, a sustained trend of higher spending per capita in RWS, and RWS’s intensified marketing efforts through digital platforms, which will attract more footfall and spending.
What about Genting Malaysia, whose assets include Resorts World Genting (RWG)? In February, Genting Malaysia closed two of its three casinos at RWG, Genting Casino 1 (Circus Place) and Genting Casino 2 (Hollywood). Although no reasons were given for the closure of these two gaming zones, it is believed that they had faced dwindling patronage. In response to media articles about the closure, RWG through its official website said it has to close certain sections of its casinos to facilitate improvements.
See also: 'I am excited to work with Singapore', says Anwar at annual investor conference by Bursa Malaysia
In 1QFY2024 ended March, Genting Malaysia reported a net profit of RM36.7 million ($10.57 million), reversing from a RM45.4 million loss in the previous corresponding period. Revenue from the company’s leisure and hospitality business in Malaysia grew 25% y-o-y to RM1.7 billion, largely attributable to overall higher volume of business from RWG’s gaming and non-gaming segments.
In its outlook, the company says it is proceeding with the continued implementation of tourism-related measures such as visa-free entry for citizens of China and India, which are expected to contribute positively to the Malaysia tourism sector. To drive growth in key business segments, Genting Malaysia will continue to implement innovative marketing approaches to broaden customer outreach whilst capitalising on its value propositions.
The company notes that it is investing in new and updated products and experiences, including upcoming ecotourism attractions.
